Stamp Tax on Building Land (Verba 28.1 TGIS) – CAAD Arbitration 154/2015-T

Arbitration Decision

I. Report

1. "Fund A…" (hereinafter referred to as "Claimant"), VAT identification number …, with registered office at …, n.º …, ….º, in Lisbon, having been notified of the dismissal of the administrative appeal (Administrative Appeal n.º … 2013 …) filed pursuant to article 76.º, n.º 1, of the Code of Tax Procedure and Process (CPPT), of the order issued in the voluntary reclamation proceeding n.º … 2013 …, which had dismissed the request for annulment of the Stamp Tax (IS) assessment for the year 2012, relating to item 28.1 of the General Stamp Tax Table (TGIS), effected on 07-11-2012, in the amount of €18,403.32 (eighteen thousand, four hundred and three euros and thirty-two cents), filed on 04 March 2015, a petition for constitution of a sole arbitral tribunal and arbitral pronouncement, in accordance with the combined provisions of articles 2.º and 10.º, n.º 2 of Decree-Law n.º 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to only as "RJAT") and articles 1.º and 2.º of Ordinance n.º 112-A/2011, of 22 March, in which the Tax and Customs Authority (AT) is requested, with a view to the declaration of illegality and consequent annulment of the said assessment act and to the condemnation of the Respondent to pay compensation for unjust provision of guarantee, pursuant to articles 53.º of the General Tax Law (LGT) and 171.º of the CPPT.

2. The Claimant opted not to appoint an arbitrator.

3. The petition for constitution of the arbitral tribunal was accepted by the President of CAAD and notified to the AT on 05 March 2015.

4. The Signatory was appointed by the President of the Deontological Council of CAAD as arbitrator of the sole arbitral tribunal, pursuant to the provision of article 6.º of the RJAT, and notification of acceptance of the appointment was given within the applicable time period.

5. On 23 April 2015, the parties were notified of this appointment and did not object thereto, in accordance with the combined provisions of article 11.º n.º 1 paragraphs a) and b) of the RJAT and articles 6.º and 7.º of the CAAD Deontological Code.

6. Thus, in conformity with the provision in paragraph c) of n.º 1 of article 11.º of the RJAT, the sole arbitral tribunal was constituted on 11 May 2015.

7. The Respondent was notified, by arbitral order of 11 May 2015, to, in accordance with article 17.º, n.º 1, of the RJAT and within the period of 30 days, file its response and, if desired, request additional evidence.

8. On 19 June 2015, the Respondent filed its response, arguing for the dismissal of the claims.

9. However, it did not submit a copy of the administrative file on which the assessment act was based.

10. On the same date it requested waiver of the meeting referred to in article 18.º of the RJAT.

11. On 23 June 2015, the Claimant expressed its agreement with the waiver of the said meeting as well as of final submissions.

12. Considering that the parties requested no production of evidence other than what the Claimant submitted with the petition for arbitral pronouncement, and that no exception was invoked, the Arbitral Tribunal, having regard to the principles of autonomy in the conduct of the proceedings, celerity, simplification and procedural informality, inherent in n.º 2 of articles 19.º and 29.º of the RJAT, by order of 02 July 2015, waived the holding of the meeting provided for in article 18.º of the same decree-law as well as the submission of final submissions.

13. The date of 03 September 2015 was further set for the pronouncement of the respective final arbitration decision.

14. The parties were notified of this order on 03 July 2015.

15. On 07 July 2015 the Claimant made the payment of the subsequent arbitration fee, cf. article 4.º, n.º 3, of the Regulation of Costs in Tax Arbitration Proceedings.

II. Clarification of Jurisdiction

1. The parties enjoy legal personality and capacity, are entitled to participate (articles 4.º and 10.º, n.º 2 of the RJAT and article 1.º of Ordinance n.º 112-A/2011, of 22 March) and are duly represented.

2. The Arbitral Tribunal is regularly constituted and is materially competent to hear and decide the petition, cf. article 2.º, n.º 1, paragraph a) of the RJAT.

3. The proceedings are not affected by any nullity.

III – Matters of Fact

1. Grounds

1.1. In the arbitral petition, the Claimant alleges:

a) "The aforementioned stamp tax assessment acts are vitiated by illegality, insofar as they violate the provision of article 99.º, paragraph a) of the Code of Tax Procedure and Process, with the grounds that shall be demonstrated hereinafter" (article 6.º of the arbitral petition).

b) "The Claimant disagrees with the assessment of Stamp Tax on the real property identified above. In fact, in the understanding of the Claimant, item 28.1 of the TGIS cannot be applied to article …, insofar as this concerns land for construction and not property with residential use, as required by the letter of the rule on the date of the assessment now contested" (article 10.º).

c) "Item 28 of the TGIS, in the wording in force until 31 December 2013, does not tax land for construction, but only:

'28. Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value recorded in the register, in accordance with the Municipal Tax on Real Property Code (CIMI), is equal to or greater than 1,000,000 – on the patrimonial tax value used for IMI purposes:

28.1 Per residential property – 1%'" (article 11.º).

d) "Now, while it is true that the aforementioned article … on the date of assessment had a patrimonial tax value exceeding one million euros (as from 31 December 2012 the patrimonial tax value of this article became €984,540.00) it is also true that it did not meet the other essential requirement demanded by item 28.1 of the TGIS to be taxed under Stamp Tax, which is residential use. In effect, the article in question was classified as land for construction in that year and not as an urban property with residential use" (article 12.º).

e) "Since the article in question consists of land for construction and not of property with residential use, it cannot be subsumed under Item 28.1 of the TGIS, in the wording in force on the date of the facts" (article 14.º).

f) "Land for construction only becomes subsumed under Item 28 of the TGIS as from 1 January 2014, so any assessment prior to this date is illegal" (article 15.º).

g) "Article 194.º of Law n.º 83-C/2013, of 31 December, which approved the State Budget for 2014, contemplates an amendment to item 28.1 of the TGIS, with the aim of taxing land for construction; however, it only came into force on 1 January 2014" (article 16.º).

h) "(…) And the new wording is as follows:

'28.1 Per residential property or per land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provision in the IMI Code – 1%'" (article 17.º).

i) "That is, the legislator itself thus acknowledges that the rule of incidence did not permit, until 31 December 2013, the taxation of land for construction under Item 28.1 of the TGIS, and amends the rule so as to tax, as from 1 January 2014, also 'land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provision in the IMI Code'" (article 18.º).

j) "As stated in arbitration decision n.º 215/2013-T, of 21 April 2014, 'and one should not say that such legislative amendment has the legal nature of an interpretative rule, and as such retroactive. In effect, as Oliveira Ascensão states, for a law to be interpretative it is necessary that (1) there exists doubt in doctrine and/or case law as to the meaning of the preceding law; (2) that the subsequent law opts for one of the interpretations in contention, and that (3) the subsequent law aims to interpret the old law, which aim must result unequivocally from its text (…). None of the requirements are met in the concrete case. In the first place, this is not an interpretative rule that can be integrated into the meaning and scope of the preceding wording (at issue herein) of item 28.1 of the TGIS, since, if this were an interpretative law, such would have to result from an express declaration in the text or in the preamble of the decree-law, stating that it was an interpretative rule. A declaration that the legislator did not make. In the absence of an express declaration of the law itself, the interpretative character may still result 'from the text, when there is a flagrant tacit reference of the new source to a pre-existing doubtful normative situation (…). None of this is verified, however, in the concrete case.

One is therefore, in the understanding of this Tribunal, facing an innovative amendment to the rule of item 28.1 of the TGIS, which implies that such amendment will only produce its effects as from the year 2014 onwards'" (article 20.º).

k) "We fully share this opinion. From the letter of the law in force on the date of the facts, it could not be understood that residential use comprised properties other than those devoted to residential purposes in the real property register. And if this were not the case, the legislator would not have felt the need to amend the letter of the law to subsume land for construction under Item 28.1 of the TGIS.

Given that it is a new law, in accordance with article 12.º of the Civil Code, it can only apply to tax periods beginning on or after its entry into force, that is, as from 1 January 2014'" (article 22.º).

l) "Thus, in light of such circumstance, the AT is prevented from applying the new wording of item 28.1 of the TGIS to taxes assessed in prior years. The same may only be applied to tax facts occurring at an earlier date, by force of the principle of non-retroactivity of tax law, as enshrined in article 103, n.º 3 of the Constitution of the Portuguese Republic" (article 23.º).

m) "In effect, article 103.º, n.º 3 of the Constitution provides that 'no one can be obliged to pay taxes that have not been created in accordance with the Constitution, that have a retroactive nature or whose assessment and collection are not carried out in accordance with the law'" (article 24.º).

n) "As already mentioned, given the principle of specific typicality, only urban properties of the type 'building with construction fit to serve as residential accommodation for persons' can be subject to the incidence of the rule, that is, only after submission of Model 1 of IMI communicating the completion of works does the property become classified as urban property with residential use" (article 47.º).

o) "Thus, given that the CIMI does not define what is 'property with residential use', it seems to the Claimant that the legislator intended to refer to residential properties, in the sense of article 6.º of the CIMI and not to land for construction" (article 48.º).

p) "Now, from the explanatory memorandum of Law n.º 55-A/2012, of 29 October, the legislative intention of not extending the scope of incidence to land for construction is made clear. The Government, in presenting to the Plenary of the National Assembly the Bill 96-XII, would have said, through the Secretary of State for Tax Affairs: 'First and foremost, the Government proposes the creation of a special tax to tax residential urban properties of higher value. This is the first time in Portugal that a special taxation on high-value properties intended for residential purposes has been created. This tax will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and shall apply to properties valued at equal to or greater than 1 million euros. With the creation of this additional tax, the fiscal effort required of these owners will be significantly increased in 2012 and in 2013'" (article 50.º).

q) "Concludes the arbitration decision in Proceeding n.º 210/2014-T, of 30 July, with which we fully agree, 'This understanding, according to which the concept of "land for construction", for tax purposes, cannot be considered as "property with residential use", has been, moreover, consistently affirmed in multiple Arbitration Decisions, in addition to those already cited herein (AD n.º 48/2013-T, of 9/10/2013; AD n.º 53/2013-T, of 2/10/2013; AD n.º 180/2013-T, of 7/3/2014; AD n.º 189/2013-T, of 20/3/2014; AD n.º 288/2013-T, of 30/4/2014), as well as in various Court Decisions such as, for example, the following: 'Given that the legislator has not defined the concept of «properties (urban) with residential use», and resulting from article 6.º of the IMI Code - subsidiarily applicable to Stamp Tax provided for in the new item n.º 28 of the General Table - a clear distinction between «urban residential properties» and «land for construction», the latter cannot be considered, for purposes of incidence of Stamp Tax (Item 28.1 of the TGIS, in the wording of Law n.º 55-A/2012, of 29 October), as urban properties with residential use.' (Judgment of the STA of 23/4/2014, proc. 271/14)'" (article 51.º).

r) "It is thus demonstrated that land for construction does not have residential use, for purposes of applying item 28.1 of the TGIS, and is therefore not subject to taxation under Stamp Tax by virtue of item 28.1, in the wording in force until 31 December 2013, so the Stamp Tax assessment now contested should be annulled for being illegal and the situation prior to the issuance thereof should be restored" (article 52.º).

s) "The Claimant did not pay the Stamp Tax assessed ex officio by the AT under the transitional provision provided for in article 6.º of Law n.º 55-A/2012, of 29 October, so the Finance Service of Lisbon – 3 initiated the competent tax enforcement proceeding, with a view to coercive collection of the tax" (article 54.º).

t) "In order to, and with a view to suspension of the tax enforcement proceeding (Tax Enforcement Proceeding n.º … 2013 …), the now Claimant provided suitable guarantee, as per the copy attached as document n.º 3" (article 55.º).

u) "Article 53.º of the LGT provides that in case of error attributable to the services, the now Claimant has the right to be compensated for damages resulting from the provision of guarantee submitted to suspend the tax enforcement proceeding, without dependency on the period for which it is maintained" (article 56.º).

v) "Now, article 171.º of the CPPT provides that 'compensation in case of a bank guarantee or equivalent unjustly provided shall be requested in the proceeding in which the legality of the enforceable debt is contested'.

Article 2 of the same article provides that 'compensation must be claimed in the complaint, challenge or appeal or in case its ground is subsequent within 30 days of its occurrence'" (article 57.º).

w) "Based on the foregoing, the Claimant has the right to compensation corresponding to all costs incurred with the guarantee provided, plus interest at the legal interest rate calculated on such costs and counted from the dates on which they were incurred until the date on which the guarantee is authorized to be released" (article 61.º).

Concludes, requesting that the illegality of the assessment act be declared, with the consequent annulment, as well as that compensation for unjust provision of guarantee be awarded.

1.2. In its response, the AT alleges, in summary:

a) "In the absence of any definition of the concepts of urban property, land for construction and residential use, under Stamp Tax, one must resort to the CIMI, in search of a definition that allows determination of possible subjection to Stamp Tax, in accordance with the provision of art. 67.º, n.º 2 of the Stamp Tax Code in the wording given by Law n.º 55-A/2012, of 29/10" (article 10.º of the Response).

b) "In accordance with the said legal provision, to matters not regulated in the Code, relating to item n.º 28.º of the TGIS, the provision of the CIMI applies subsidiarily" (article 11.º).

c) "The notion of use of the urban property is grounded in the part relating to assessment of real property, which makes sense since the assessment of the real property (purpose) incorporates value to the real property, constituting a distinguishing fact of determination (coefficient) for purposes of assessment" (article 14.º).

d) "As results from the expression '…value of authorized buildings', contained in art. 45.º, n.º 2 of the CIMI, the legislator opted to determine the application of the assessment methodology of properties in general to the assessment of land for construction, and therefore the use coefficient provided for in art. 41.º of the CIMI is applicable thereto" (article 15.º).

e) "In this sense see Judgment n.º 04950/11, of 14/02/2012, of the South Administrative Court: 'The regime for assessment of the patrimonial value of land for construction is provided for in art. 45.º of the CIMI. The assessment model is the same as for constructed buildings, although starting from the building to be constructed, taking as a basis its respective project, the value of the land for construction corresponds, fundamentally, to a legal expectancy, embodied in the right to construct thereon a property with certain characteristics and a certain value. It would be that expectancy of production of wealth materialized in a property to be constructed that causes an increase in the value of the assets and the wealth of the owner of the land for construction, as soon as the real property in question starts to be considered as land for construction. For that reason, the greater the value of the property to be built, the greater the value of the land for construction underlying it (cf. Art. 6.º, n.º 3 of the CIMI)'" (article 16.º).

f) "In conclusion, in the assessment of land for construction the legislator intended that the methodology of assessment of urban properties in general be applied, thus all coefficients, above identified, should be taken into account, in particular the use coefficient provided for in art. 41.º of the CIMI, this resulting furthermore from n.º 2 of art. 45.º of the CIMI, by referring to the value of buildings authorized or planned on the same land for construction" (article 17.º).

g) "Contrary to what is advocated by the Claimant, the AT understands that the concept of 'properties with residential use', for purposes of the provision in item 28 of the TGIS, comprises both constructed properties and land for construction, foremost taking into account the literal element of the rule" (article 19.º).

h) "Note that the legislator does not refer to 'properties intended for residential purposes', having opted for the notion 'residential use' - a different and broader expression, whose meaning must be found in the need to integrate other realities beyond those identified in art. 6.º, n.º1 paragraph a) of the CIMI" (article 20.º).

i) "The mere constitution of a right of potential construction causes an immediate increase in the value of the real property in question, hence the rule contained in art. 45.º of the CIMI which mandates separation of the two parts of the land" (article 21.º).

j) "The AT understands that the provision of item 28 of the TGIS does not constitute a violation of any constitutional command" (article 30.º).

k) "Item 28 of the TGIS applies to ownership, usufruct or right of superficies of urban properties with residential use, whose patrimonial tax value recorded in the register, in accordance with the CIMI, is equal to or greater than €1,000,000.00, that is, it applies to the value of the real property" (article 31.º).

l) "The different capacity of the real properties (residential/services/commerce) sustains the different treatment, having constituted a choice of the legislator, for political and economic reasons, to exclude from the incidence of Stamp Tax real properties intended for purposes other than residential" (article 36.º).

m) "It is further important to state that taxation under stamp tax obeys criteria of adequacy, applying in a non-discriminatory manner to all holders of real properties with residential use valued at above €1,000,000.00, applying to the wealth embodied and manifested in the value of the real properties" (article 37.º).

n) "Thus, the choice for this mechanism of revenue generation is justified, which would only be subject to censure, in light of the principle of proportionality, if it resulted manifestly indefensible" (article 39.º).

o) "Which is not the case since such measure shall apply in a non-discriminatory manner to all holders of real properties with residential use valued at above €1,000,000.00" (article 40.º).

Concludes, arguing for the dismissal of the petition for declaration of illegality and consequent annulment of the assessment, absolving the AT of the claim.

1. Established Facts

The following facts are considered established:

a) The Claimant has registered in its name the urban property registered in the urban real property register of the parish of …, municipality of Lisbon, under article … (previously registered under article …), cf. doc. n.º 2.

b) The property is registered in the register with the following description: "Property Type: Land for Construction".

c) The property, on the date, had a patrimonial tax value of €3,680,644.05.

d) Based on the provision in item 28.1 of the General Stamp Tax Table (TGIS), the AT assessed the 2012 stamp tax, which is at the origin of the assessment at issue, in the amount of €18,403.32, cf. doc. n.º 1.

e) To suspend the tax enforcement proceeding n.º … 2013 …, in accordance with article 169.º of the CPPT, the Claimant provided an autonomous bank guarantee ("on first demand"), through B… (Operation n.º ………..), cf. doc. n.º 3.

1. Unproven Facts

There are no facts relevant to the decision of the case that have not been proven.

1. Grounds for Establishment of Facts

The facts were established as proven based on the documents submitted with the petition for arbitral pronouncement, since the Tax and Customs Authority did not submit the administrative file.

There is no controversy regarding the facts.

IV – Legal Issues

Questions to be Decided

On the Illegality of the Assessment Contested

On the Non-Retroactivity of the Amendment to Item 28 of the TGIS

On Compensation for Unjust Guarantee

On the Illegality of the Assessment Contested

To determine whether "the concept of land for construction, for tax purposes, [can or cannot] be considered property with residential use, under the provision of article 1.º, n.º 1, of the Stamp Tax Code and of the same Item 28".

Although the AT asserts, in article 3.º of its response, that "[the claimant] further alleges that the interpretation underlying the assessments contested, according to which land for construction are properties with residential use, is vitiated by unconstitutionality for violation of the principles of legality and equality enshrined in the Constitution of the Portuguese Republic." Nevertheless, reading the petition of the Claimant, it verifies that the same does not invoke, at any time, such a defect of unconstitutionality, so the (alleged) question will not be addressed herein.

Let us then proceed.

At the origin of the controversial question (above identified) is item n.º 28 of the TGIS, added by article 4.º of Law n.º 55-A/2012, of 29/10, which provided the following (note that the wording of n.º 1 of this item has since been amended by Law n.º 83-C/2013, of 31/12):

"28 – Ownership, usufruct or right of superficies of urban properties whose patrimonial tax value recorded in the register, in accordance with the Municipal Tax on Real Property Code (CIMI), is equal to or greater than €1,000,000.00 – on the patrimonial tax value for IMI purposes: 28.1 – Per residential property – 1%. 28.2 – Per property, when the taxpayers who are not individuals are resident in a country, territory or region subject to a clearly more favorable tax regime, as per the list approved by ordinance of the Minister of Finance – 7.5%."

Law n.º 55-A/2012, which came into force on 30/10/2012, did not proceed to qualify the concepts contained in the said item n.º 28, namely, the concept of 'property with residential use'. However, observing what article 67.º, n.º 2, of the Stamp Tax Code (Código do Imposto do Selo) provides, also added by the cited Law n.º 55-A/2012, it verifies that 'to matters not regulated in the present code relating to item 28 of the General Table, the CIMI applies subsidiarily.' Given doubt as to the scope of the said item, it is therefore justified to observe what the CIMI says.

From reading the CIMI it appears that the concept of 'property with residential use' seems to refer to the concept of 'urban property' (see article 2.º and, particularly, article 4.º).

Now, among the species of 'urban properties' (article 6.º), mention is expressly made of 'urban residential properties' [see n.º 1, paragraph a)] and 'land for construction' [see n.º 1, paragraph c)]. Numbers 2 and 3 of the said article of the CIMI specify that the former "are buildings or structures licensed for such purpose or, in the absence of a license, that have as normal destination each of these purposes", and that the latter are "lands situated within or outside an urban agglomeration, for which a license or authorization for a subdivision operation or construction has been granted, prior notice admitted or favorable prior information issued, and also those that have been declared as such in the acquisition deed, with the exception of lands in which the competent entities prohibit any of such operations, namely those located in green areas, protected areas or which, in accordance with municipal land planning plans, are devoted to public spaces, infrastructure or facilities."

However, from reading the provisions of the CIMI (see articles 2.º, 4.º and 6.º), there is no (specific) concept of 'property with residential use' in the classification of 'properties'. Thus, given the absence of exact terminological correspondence of the concept of 'property with residential use' with another used in this and other decrees-law, only interpretive hypotheses can be ventured, in light of the provision of article 9.º, n.º 1, of the Civil Code.

This was what was already done, for example, in Arbitration Decision n.º 231/2013-T, of 3/2/2014: "The starting point for the interpretation of that expression 'properties with residential use' is, naturally, the text of the law, it being on the basis of it that one must reconstruct the 'legislative thought', as required by n.º 1 of article 9.º of the Civil Code, applicable by force of the provision of article 11.º, n.º 1, of the LGT".

In this context, the two possible interpretations were tested: 1) that the concept in question ('properties with residential use') refers to 'residential properties'; 2) that the concept refers to a concept distinct from that of 'residential properties'.

Regarding the first of the hypotheses, it is concluded herein, as in the said Decision, with which we agree, that "if it is understood that the expression 'property with residential use' coincides with the [concept] of 'residential properties', it is manifest that the assessments will be vitiated by error regarding the facts and the law, since all properties in relation to which Stamp Tax was assessed under the said item n.º 28.1 are land for construction, without any building or structure, required by that n.º 2 of article 6.º to satisfy that concept of 'residential properties'. Therefore, if the interpretation is adopted that 'property with residential use' means 'residential property', the assessments whose declaration of illegality is requested will be illegal, since there is no building or structure in any of the lands."

In summary, it results therefrom that: either the terms of the expression used in item n.º 28.1 of the TGIS are coincident with what is extracted from n.º 2 of article 6.º of the CIMI - and then the assessments made with that justification are illegal for the reasons already mentioned above -, or then the said terms are not coincident. In the latter case, it will have to be concluded that it was intended to use a concept distinct from that of 'residential properties'.

But what concept would that be?

This is, therefore, the investigation underlying the second hypothesis addressed in the said Decision, which concluded that, there being no coherent meaning in item n.º 28.1, only the avenue of interpretation of the legal text remained, framed by article 9.º, n.º 3, of the Civil Code: "The recognized lack of coherence of Stamp Tax is particularly exuberant in the case of this item n.º 28.1, hastily included in the margin of the General State Budget, by a tax legislator without perceptible overall tax guidance, successively implementing rules of fiscal tightening in line with the setbacks of budget execution, impositions of international institutional creditors (represented by the 'troika') and oversight by the Constitutional Court. [...]. In this context, there not existing sure interpretive elements that allow detecting legislative coherence in the solution adopted in the said item n.º 28.1 or the correctness or incorrectness of the solution adopted (relevant for interpretive purposes in light of n.º 3 of article 9.º of the Civil Code), the text of the legal provision must be the principal element of interpretation, in conformity with the presumption, imposed by that same n.º 3 of article 9.º, that the legislator knew how to express its thought in adequate terms."

Now, as the cited Decision well proceeds, "in light of those meanings of the words 'use' and 'to use', which are 'to assign a purpose' or 'to apply', the formula used in that item n.º 28.1 of the TGIS, manifestly encompasses properties to which a purpose for residential use has already been assigned, properties already applied to residential purposes, so it is important to inquire whether it will also encompass properties which, although not yet applied to residential purposes, are intended for such purposes, namely in a subdivision license. To do so, it will be necessary to clarify when it can be understood that a property is used for a residential purpose, in particular whether it is when that purpose is assigned to it in a subdivision license or licensing act or similar, or only when the effective assignment of that purpose is completed. [...]. The text of the law, in adopting the formula 'property with residential use', instead of 'urban properties with residential use', which appears in the [...] 'Explanatory Memorandum', strongly points to the effect that it is required that residential use already be completed, as only then will the property have such use."

The fact is that, in the present case - as was the case in the matter underlying the Decision that has been so often cited -, "one is facing a reality still more distant in relation to residential use which is that of there not even existing any building or structure and therefore one cannot consider existing a use that presupposes its existence. On the other hand, as the Requester well states [and the now claimant, in the very same terms], the legislative intention of not extending the scope of incidence to land for construction was expressly stated by the Government when presenting to the Plenary of the National Assembly the Bill 96-XII, saying, through the voice of the Secretary of State for Tax Affairs: 'First and foremost, the Government proposes the creation of a special tax to tax residential urban properties of higher value. This is the first time in Portugal that a special taxation on high-value properties intended for residential purposes has been created. This tax will be 0.5% to 0.8%, in 2012, and 1%, in 2013, and shall apply to properties valued at equal to or greater than 1 million euros. With the creation of this additional tax, the fiscal effort required of these owners will be significantly increased in 2012 and in 2013'. The express reference to 'homes' as the target of the incidence of the new tax leaves no room for doubt regarding the legislative intention. On the other hand, in the discussion of the said Bill there is no reference to 'land for construction'."

In effect, as also argues, correctly, the claimant, it follows "from the presentation of bill n.º 96-XII [that] what was proposed to the representatives and they approved was the creation of a taxation of luxury real property assets, which does not include land for construction or, in the clearer words of the SEAF [Secretary of State for Tax Affairs], a special taxation on high-value properties intended for residential purposes and a special taxation that shall apply to properties equal to or greater than 1 million euros, that is, a taxation on the residential properties referred to in n.º 2 of art. 6.º of the CIMI."

Finally, note what Arbitration Decision n.º 49/2013-T, of 18/9/2013, clearly and correctly states: "A piece of land for construction - whatever the type and purpose of the building that will, or may be, erected thereon - does not, by itself, satisfy any condition to be licensed as such or to be defined as having residential construction as its normal purpose. Therefore, referring the provision of incidence of stamp tax to urban properties with 'residential use', without there being established any specific concept for the purpose, cannot be extracted therefrom that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land."

This interpretation has been defended by the case law of this Arbitral Tribunal, in a peaceful and consistent manner, as per decisions rendered in numerous proceedings,[1] in addition to those referred to in article 53.º of the arbitral petition as well as in many others.

As well as by the Supreme Administrative Court.[2]

In the name of the principles of procedural economy and celerity and for a matter of procedural authenticity and fidelity, the arguments contained in the judgment of the STA, of 23/04/2014, rendered in proceeding n.º 272/14, available at www.dgsi.pt, are transcribed herein:

"4.3 The question that is the subject of the present appeal consists in determining what is the scope of incidence of item 28.l. of the General Stamp Tax Table in the wording given to it by Law n° 55-A/2012 of 29.10, in particular whether in that rule land for construction should be included and, concretely, whether land for construction with patrimonial tax value equal to or greater than €1,000,000 are subsumed, or not, in the species of urban properties 'with residential use.'

The contested judgment considered that, in light of the literal text of item n.° 28.1, it must be ruled out of the scope of incidence of Stamp Tax provided therein land for construction that does not yet have any type of use defined, as it is not yet applied nor intended for residential purposes.

It further considered that land for construction that does not have defined use cannot be considered properties with residential use, as they do not yet have any use nor any destination other than construction of unknown type.

In this context, it concluded that the assessment contested is vitiated by error regarding the facts and the law, since the property in relation to which Stamp Tax was assessed under the said item n.° 28.1 is a piece of land for construction, without any building or structure, required to satisfy that concept of 'residential properties'.

Against such decision the Public Treasury rises, arguing that the concept of 'properties with residential use' for purposes of the provision in item n.º 28 of the TGIS, comprises both constructed properties and land for construction, since the legislator does not refer to 'properties intended for residential purposes' but rather has opted for the notion 'residential use', an expression it considers different and broader, integrating other realities beyond those identified in art. 6.º n.º 1 paragraph a) of the CIMI.

Concluding that residential use, for purposes of application of item 28, does not necessarily imply the existence of buildings or structures, therefore applying to land for construction with such use.

It will be advanced from now that the appeal does not merit favorable judgment and that the judgment that thus decided should be confirmed.

In effect, the question, in these terms raised, is, even in the factual assumptions, identical to the question that was appreciated and decided in this Supreme Administrative Court on a recent date, by judgments of 09.04.2014, rendered in proceedings 1870/13 and 48/14, in which the present rapporteur had intervention as an adjunct, in which it was decided that 'land for construction' cannot be considered, for purposes of the incidence of Stamp Tax provided in Item 28.1 of the respective General Table (in the wording of Law n.º 55-A/2012, of 29 October), as urban properties with residential use.

This is case law that is also embraced herein, as we fully agree with its reasoning, so we shall limit ourselves to reproducing what was said on the question in the said Judgment 1870/13:

«The concept of 'property (urban) with residential use' was not defined by the legislator. Neither in Law n.º 55-A/2012, which introduced it, nor in the IMI Code, to which n.º 2 of article 67.º of the Stamp Tax Code (likewise introduced by that Law), refers on a subsidiary basis. And it is a concept that, probably due to its imprecision – a fact all the more serious as it is a function of it that the scope of objective incidence of the new taxation is delineated -, had a short life, as it was abandoned upon the entry into force of the State Budget Law for 2014 (Law n.º 83-C/2013, of 31 December), which gave new wording to that item n.º 28 of the General Table, and which now delineates its scope of objective incidence through the use of concepts that are legally defined in article 6.º of the IMI Code.

This amendment - to which the legislator did not attribute an interpretative character, nor do we think it did -, merely renders unequivocal for the future that land for construction whose building, authorized or planned, is for residential purposes are encompassed in the scope of item 28.1 of the General Stamp Tax Table (provided that its patrimonial tax value is of a value equal to or greater than 1 million euros), clarifying nothing, however, in relation to past situations (assessments of 2012 and 2013), such as the one at issue in the present proceedings.

Now, as to these, it does not seem possible to adopt the interpretation of the appealing party, as it does not result unequivocally either from the letter or from the spirit of the law that its intention was, ab initio, to encompass in its scope of objective incidence land for construction for which building of residential properties has been authorized or planned, as results today unequivocally from item 28.1 of the General Stamp Tax Table.

Nothing unequivocal results from the letter of the law, furthermore, as it itself, in using a concept it did not define and which also was not defined in the decree-law to which it referred on a subsidiary basis, unnecessarily lent itself to equivocations, in a matter – tax incidence - in which certainty and legal security should also be principal concerns of the legislator.

And from its "spirit", apprehensible in the explanatory memorandum of the bill that is at the origin of Law n.º 55-A/2012 (Bill n.º 96/XII – 2.ª, Diary of the National Assembly, series A, n.º 3, 21/09/2012, p. 44, available at www.parlamento.pt) nothing else results than the concern of securing new tax revenue, from sources of wealth "more spared" in the past from the rapacity of the Tax Authority than labor income, in particular capital income, securities gains and property, reasons these that bring no relevant contribution to the clarification of the concept of 'properties (urban) with residential use', as they give it as established, without any concern to clarify it. Such clarification will, however, have arisen - as reported in the Arbitration Decision rendered on 12 December 2013, in proceeding n.º 144/2013-T, available in the CAAD database -, upon presentation and discussion in the National Assembly of that bill, in the words of the Secretary of State for Tax Affairs, who would have expressly stated, as is seen from the Diary of the National Assembly (DAR I Series n.º 9/XII – 2, of 11 October, p. 32) that: «The Government proposes the creation of a special tax on urban residential properties of higher value. This is the first time in Portugal that a special taxation on high-value properties intended for residential purposes has been created. This tax shall be 0.5% to 0.8% in 2012 and 1% in 2013, and shall apply to properties valued at equal to or greater than 1 million euros" (underlined by us), from which it is seen that the reality to be taxed which was in mind is, after all, and notwithstanding the terminological imprecision of the law, "urban residential properties", in common language "homes", and not other realities.

The fact that it can be considered that in the determination of the patrimonial tax value of urban properties classified as land for construction account should be taken of the use that the building authorized or planned for it will have in order to determine the respective value of the area of implementation (cf. n.º 1 and 2 of article 45.º of the CIMI), does not determine that land for construction can be classified as 'properties with residential use', as residential use always appears in the IMI Code referred to "buildings" or "structures", existing, authorized or planned, as only these can be inhabited, which does not occur in the case of land for construction, which do not have, in themselves, conditions for such, being not susceptible of being used for residential purposes unless and when buildings authorized and planned for them are erected thereon (but in that case they will no longer be 'land for construction' but another species of urban properties – 'residential', 'commercial, industrial or for services' or 'other' – article 6.º of the CIMI).

It would be strange, moreover, if the determination of the scope of the provision of tax incidence of item n.º 28 of the General Stamp Tax Table were found, at the end of the day, in the provisions for determination of the patrimonial tax value of the IMI Code, and that the terminological imprecision of the legislator in the wording of that rule were, after all, elucidated and finally clarified by way of an indirect and equivocal referral to the use coefficient established by the legislator in relation to constructed properties (article 41.º of the IMI Code).

Thus, taking into account that a piece of land for construction – whatever the type and purpose of the building that will, or may be, erected thereon – does not, by itself, satisfy any condition to be licensed as such or to be defined as having residential construction as its normal purpose, and referring the provision of tax incidence of stamp tax to urban properties with 'residential use', without there being established any specific concept for the purpose, cannot be extracted therefrom that it contains a future potentiality, inherent to a distinct property that may possibly be built on the land.

It is concluded therefore, in conformity with what was decided in the judgment under appeal that, as a result of article 6.º of the IMI Code a clear distinction between urban 'residential' properties and 'land for construction', the latter cannot be considered as 'properties with residential use' for purposes of the provision in item n.º 28.1 of the General Stamp Tax Table, in its original wording, as given to it by Law n.º 55-A/2012, of 29 October». (end of citation).

It is this case law that is embraced herein and is reiterated, taking into account the rule contained in n.º 3 of art. 8º of the Civil Code – which imposes on the judge the duty to consider all cases that deserve like treatment, in order to obtain a uniform interpretation and application of the law, it being that the appealing party does not adduce new grounds that would undermine such jurisprudential orientation".

On the Non-Retroactivity of the Amendment to Item 28 of the TGIS

As stated before, article 194.º of Law n.º 83-C/2013, of 31 December, which approved the State Budget for 2014, with the aim of taxing land for construction under stamp tax, amended the wording of item 28.1 of the TGIS as follows:

"28.1 — Per residential property or per land for construction whose building, authorized or planned, is for residential purposes, in accordance with the provision in the IMI Code — 1 %".

Such amendment came into force on 1 January 2014, cf. article 260.º of the said law.

Thus, in light of the principle "tempus regit actus" inherent in article 12.º, n.º 1, of the General Tax Law, according to which "tax rules apply to facts subsequent to their entry into force, and no retroactive taxes can be created" as well as the provision in article 103.º, n.º 3, of the Constitution of the Portuguese Republic, which prohibits retroactivity in the application of taxes, the new wording of the said provision applies to tax periods beginning on or after its entry into force, that is, as from 1 January 2014.

For accompanying this matter, the arbitration decision rendered in Proceeding n.º 215/2013-T, of 21 April 2014, we proceed to transcribe it:

"and one should not say that such legislative amendment has the legal nature of an interpretative rule, and as such retroactive. In effect, as Oliveira Ascensão states, for a law to be interpretative it is necessary that (1) there exists doubt in doctrine and/or case law as to the meaning of the preceding law; (2) that the subsequent law opts for one of the interpretations in contention, and that (3) the subsequent law aims to interpret the old law, which aim must result unequivocally from its text (…).None of the requirements are met in the concrete case. In the first place, this is not an interpretative rule, that can be integrated into the meaning and scope of the preceding wording (at issue herein) of item 28.1 of the TGIS, as, if this were an interpretative law, such would have to result from an express declaration in the text or in the preamble of the decree-law, stating that it was an interpretative rule. A declaration that the legislator did not make. In the absence of an express declaration of the law itself, the interpretative character may still result 'from the text, when there is a flagrant tacit reference of the new source to a pre-existing doubtful normative situation (…).

One is therefore, in the understanding of this Tribunal, facing an innovative amendment to the rule of item 28.1 of the TGIS, which implies that such amendment will only produce its effects as from the year 2014 onwards".

On Compensation for Unjust Guarantee

The Claimant further petitions for compensation for the costs incurred with the provision of an autonomous bank guarantee with a view to obtaining, in accordance with article 169.º of the CPPT, the suspension of the tax enforcement proceeding identified by the number … 2013 …, relating to coercive collection of the tax debt to which the present arbitral pronouncement refers.

In accordance with the provision of n.º 1 of article 53.º of the General Tax Law, the debtor who, in order to suspend execution, provides a bank guarantee or equivalent shall be compensated in full or in part for damages resulting from its provision, should the debtor have maintained it for a period of more than three years in proportion to the outcome of the administrative appeal, challenge or opposition to execution having as object the debt guaranteed.

As results from n.º 2 of the cited article, all damages incurred with the provision of guarantees provided to suspend execution are compensated, without dependency on the said period, in case of full success in an action in which there has been an error attributable to the services in the assessment of the tax.[3]

However, in accordance with n.º 3 of the same article, the amount of compensation for unjust guarantee is subject to a maximum limit equivalent to the amount resulting from the application to the guaranteed value of the indemnificatory interest rate provided for in article 43.º, n.º 4, of that law.

On the other hand, article 171.º of the CPPT establishes that "compensation in case of a bank guarantee or equivalent unjustly provided shall be requested in the proceeding in which the legality of the enforceable debt is contested" and that "compensation must be claimed in the complaint, challenge or appeal or in case its ground is subsequent within 30 days of its occurrence"

The proceeding of judicial challenge, in which the legality of the tax act is decided, constitutes, therefore, an appropriate procedural means to file the request for compensation for unjust guarantee.

In accordance with established arbitral case law, "The petition for constitution of the arbitral tribunal has as a corollary the fact that it is in the arbitral proceeding that the 'legality of the enforceable debt' shall be discussed, so that, as results from the express text of that n.º 1 of the said article 171.º of the CPPT, the arbitral proceeding is also the appropriate one to appreciate the request for compensation for unjust guarantee."[4]

In the case at hand, the error underlying the stamp tax assessment acts is exclusively attributable to the Tax Administration, the Claimant having the right to the requested compensation.

Notwithstanding the Claimant indicating, in the initial petition, that the costs incurred with the provision of the guarantees in question amounted, then, to €1,064.32, this Tribunal does not have elements that allow it to set the exact value of the requested compensation.

In effect, the amount of compensation owed under the cited rules should be calculated on the basis of costs actually incurred with the guarantees provided from the date on which they were constituted until the day on which they are released, with the maximum limit provided for in article 53.º, n.º 3, of the LGT.

In these terms, given that this Tribunal is prevented from quantifying the exact costs of the guarantees provided, as well as from determining that maximum limit, the condemnation shall be effected with reference to what shall be liquidated in execution of the present decision (articles 609.º of the Code of Civil Procedure and 565.º of the Civil Code).

V – Decision

In light of the foregoing, it is decided:

· To uphold the petition for declaration of illegality of the Stamp Tax (IS) assessment for the year 2012, relating to item 28.1 of the General Stamp Tax Table (TGIS), effected on 07-11-2012, in the amount of €18,403.32 and, consequently, to annul the assessment contested;

· To uphold the Claimant's petition regarding the right to payment of compensation for provision of guarantee to suspend the tax enforcement proceeding n.º … 2013 …, and to condemn the Tax and Customs Authority to pay the Claimants the compensation that shall be liquidated in execution of the present judgment.

Value of Proceedings

In accordance with the provision of article 306.º, n.º 2, of the CPC, 97.º-A, n.º 1, paragraph a), of the CPPT and 3.º, n.º 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is set at €19,467.64.

Costs

In accordance with article 22.º, n.º 4, of the RJAT, the amount of costs is set at €1,224.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notify.

Lisbon, 03-09-2015

The Arbitrator,

(Rui Ferreira Rodrigues)

Text prepared on computer, in accordance with the provision of article 131.º, n.º 5, of the CPC, applicable by referral from article 29.º, n.º 1, paragraph e), of the RJAT.

[1] Proc. n.ºs 42/2013-T, 48/2013-T, 49/2013-T, 53/2013-T, 180/2013-T, 189/2013-T, 202/2014-T, 210/2014-T, 516/2014-T, 523/2014-T, 586/2014-T, 599/2014-T, 757/2014-T.

[2] Judgments of 09-04-2014 (P. 1870/13); 09-04-2014 (P. 48/14); 23-04-2014 (P. 270/14, 271/14 and 272/14); 14-05-2014 (P. 1871/13, 55/14 and 0317/14); 28-05-2014 (P. 395/14); 09-07-2014 (P. 0676/14); 10-09-2014 (P. 0707/14, 0708/14 and 0740/14); 24-09-2014 (P. 01533/13, 0739/14 and 0825/14); 08-10-2014 (P. 0805/14 and 0806/14); 05-11-2014 (P. 0530/14); 14-01-2015 (P. 0541/14); 22-04-2015 (P. 0279/15 and 0347/15) and 29-04-2015 (P. 021/15).

[3] The concept of error attributable to the services is clarified in n.º 2 of art. 43.º of the LGT, regarding indemnificatory interest.

[4] See, among others, Arbitration Decisions of 14.5.2013, Proc. 1/2013 and of 02.04.2014, Proc. 224/2013-T